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Good Luck Betting Against fuboTV Stock

By Rick Munarriz - Mar 3, 2021 at 9:05AM

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The market wasn't blown away by the sports-first live TV streaming service in its second quarterly earnings release since going public. Don't fumble this opportunity.

There was a lot to like in fuboTV's (FUBO -4.26%) latest financial update, even if Wall Street's initial reaction was to send the shares lower. The live TV streaming specialist exceeded all three of the year-end subscriber targets that it had upwardly revised in recent months. It came through with improving metrics during the fourth quarter for nearly all of the gauges that matter. 

It wasn't a perfect report. Its guidance calls for a sequential dip in subscribers for the current quarter. There was a lot of red ink. Investors unaware of how many shares are actually outstanding can't escape that reality anymore. However, with a robust outlook for all of 2021 it's easy to wonder if the market got its reaction wrong after Tuesday afternoon's report. 

Friends watching a soccer game on TV.

Image source: Getty Images.

Hike the ball

It's fair to say that expectations were high heading into fuboTV's fourth-quarter earnings release. The stock surged 8% on Tuesday in an otherwise bruising day for growth stocks. The shares initially gave back all of those gains in after-hours trading following the report, but let's go over a few important wins for fuboTV here.

Two months ago fuboTV did offer up well-received preliminary results. It said it closed out the year with 545,000 subscribers. It actually wound up at 547,880 paid subscribers, 73% more than it as entertaining a year earlier. FuboTV also said that revenue would rise 77% to 84%, accelerating from the third quarter's 71% pro forma spike. Its top line actually surged 98% for the fourth quarter.

Many of the other strong metrics were new to Tuesday's report. Average revenue per user has risen 17% over the past year to $69.19, fueled by a 13% increase per user in subscriptions paid and a 52% pop per head in ad revenue. Don't sleep on the significance of the burst in ad revenue. We know that streaming live TV has gotten expensive as the providers push through rising content costs. Making ad revenue on top of the subscriptions paid will go a long way to helping steer the industry to profitability. 

In the fourth quarter of 2018 fuboTV was generating an average of $2.90 a month in ad revenue per subscriber, a decent haul at the time and more than even what Roku is presently collecting. Well, monthly ad revenue nearly doubled to $5.59 per account a year later, and now it's up to $8.47 a month.

Let's also touch on that seemingly problematic guidance. With fuboTV forecasting 520,000 to 530,000 subscribers by the end of the first quarter it's pointing to a sequential decline. We're already in March, so it's fair to say that there will be sequential dip. However, fuboTV isn't just flopping on contact to get a sympathy call from Wall Street refs. There is seasonality to the business. It went from 316,000 to 286,000 subscribers through the first six months of last year, and it more than made that back in the final half of 2020. In fact, it sees year-over-year revenue rising 98% to 102% for the quarter, likely accelerating its top-line growth yet again. 

We also saw fuboTV initiate guidance for all of 2021. It sees 760,000 to 770,000 subscribers by the end of this year, a 39% to 41% increase and comfort for those that fail to grasp the seasonality behind the first-quarter swoon. Revenue will grow even faster, with fuboTV eyeing 76% to 80% growth.

A sell-off on a blowout report seems like a buying opportunity, even if fuboTV stock has more than quadrupled through Tuesday's close since hitting the market at $10 less than five months ago. You don't have to win every quarter to win a football or NBA game. FuboTV will be fine.   

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